Station pulls plug on target

The owner of one of Australia’s dirtiest power stations, Hazelwood, has called for the Renewable Energy Target to be reduced to take account of falling demand, claiming that the target is eroding the viability of incumbent generators.

The call by International Power highlights a deepening divide over the future of the RET in the power sector, which has rocked the industry’s peak body.

The decision follows the federal government’s calling off of negotiations with International Power and other companies to close down high-emissions coal generators because of the high price being asked for the power stations.

International Power’s decision to back
Origin Energy
and TRUenergy’s push to reduce the RET to take account of falling demand is at odds with
AGL
and Pacific Hydro, which seek to maintain the target to provide investment certainty.

In its submission to the Climate Change Authority, International Power said in the context of suppressed demand forcing renewables into the market reduced spot prices because of the low running costs of clean energy projects.

This “erodes the viability of incumbent generators of all types, and undermines the investment certainty in merchant generation that is non-subsidised and market facing".

“The inconvenient truth of renewable policy is that renewables do not represent least cost greenhouse abatement at current global carbon prices, nor are they the new entrant generator of choice on an economic basis," International Power said.

“Our long-held view is that the RET adds significantly to the cost of electricity for Australian consumers. In addition we have argued that mandated new generation is market distorting and increases the cost of emission abatement in Australia, while distorting signals in the wholesale electricity market."

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The division within the energy sector over the RET has created problems within the Energy Supply Association of Australia. ESAA is yet to make a submission to the RET review but it is believed to back the Origin, Tru and International Power position, despite strong opposition from AGL and Pacific Hydro.

AGL head of economic policy and sustainability Tim Nelson said the company acknowledged there was “sometimes a diversity of views on public policy issues" in the industry.

“However, our research indicates that it is in consumer’s interests for the LRET to remain in place without amendment," Mr Nelson said.

ESAA chief executive Matthew Warren – formerly chief executive of the Clean Energy Council which supported the increase of RET to 20 per cent in 2010 – said there were “different views across the industry".

“No surprises there," Mr Warren said.

In its submission to the RET review, the NSW regulator IPART said the introduction of the carbon scheme removed the RET and the target should be abolished.

“The RET is not complementary to the carbon price and does not cost effectively address any other significant [market] failure," IPART said.

“We are of the view that electricity prices should not be used to fund investment in the renewables industry.

“Any funding to particular technologies on the basis of industry assistance should be provided transparently from government revenue, rather than through the RET and therefore electricity prices."